gap insurance

Definition

Additional insurance taken out at the time of a normal insurance policy to covered the total value of the item being insured should it not be covered due to depreciation. For example, if Becky buys a car, the value or the car starts to depreciate immediately. If she was to have an accident and total loss the vehicle, only the depreciate value would be paid out. This could be less than the amount of that she owes on the car. If she had gap insurance, this would kick in and pay the remaining balance.

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